Alan Perkins State Pension Tax: Why He Pays £800 to HMRC?

Alan Perkins’ State Pension tax case has exposed a significant problem facing millions of British pensioners.

Despite having no private pension, the retired commercial heating engineer was reported to owe approximately £800 in Income Tax because his State Pension, including additional entitlements built up through SERPS, exceeded the £12,570 Personal Allowance.

The situation has become more important in 2026/27, with the full new State Pension increasing by 4.8% to £241.30 per week.

Our review of the updated pension rates suggests Perkins could face a higher annual liability, potentially around £930–£945 before any tax relief.

Meanwhile, Chancellor Rachel Reeves has promised protection from small State Pension tax bills for certain pensioners from April 2027.

However, the proposed concession may not cover people receiving additional State Pension entitlements.

Understanding Perkins’ case requires examining how the tax is calculated, who qualifies for relief and what pensioners should do when HMRC sends a bill.

Why Does Alan Perkins Have to Pay Tax on His State Pension?

Alan Perkins attracted national attention after revealing that he faced an annual Income Tax bill of approximately £800 despite relying on his State Pension.

According to reporting based on his interview with The Telegraph, Perkins worked for around five decades, including long hours as a commercial heating engineer and additional work to support his family.

He said:

“I’ve worked like a dog for all of my life.”

His retirement income was reported to be approximately £16,500 annually, including around £4,500 in additional pension entitlements associated with SERPS.

The problem is that the State Pension is taxable income, even when it represents someone’s only source of retirement income.

For 2026/27, the standard Personal Allowance remains £12,570.

Any taxable pension income exceeding that threshold normally attracts Income Tax at the relevant rate.

Perkins’ circumstances highlight how pensioners who previously expected to avoid Income Tax can become liable through accumulated State Pension entitlements and frozen tax thresholds.

How Did SERPS Increase Alan Perkins’ State Pension?

The State Earnings-Related Pension Scheme (SERPS) operated between 1978 and 2002, allowing qualifying employees to build additional pension entitlements linked to their earnings and National Insurance contributions.

It was replaced by the State Second Pension in 2002, before the introduction of the new State Pension system in April 2016.

Workers who were not contracted out could accumulate additional entitlements, while some employees participating in eligible workplace pension arrangements contracted out of the scheme.

Importantly, historical SERPS rights were not necessarily lost when the new State Pension was introduced.

For people whose pre-2016 entitlement exceeded the full new State Pension under transitional calculations, the difference could be preserved as a protected payment.

Unlike the standard new State Pension, these protected amounts generally increase in line with inflation rather than the triple lock.

This distinction matters when estimating Perkins’ current income.

His reported pension of approximately £16,500 is substantially higher than the standard new State Pension, but the exact composition must be confirmed using his Department for Work and Pensions entitlement statement.

How Much State Pension Tax Could Alan Perkins Pay in 2026/27?

The reported £800 bill relates to his earlier financial circumstances. His actual 2026/27 liability has not been independently confirmed.

However, the figures provide a useful basis for an illustrative calculation.

Calculation Using a Uniform 4.8% Increase

If his entire reported £16,500 pension increased by 4.8%, the calculation would be:

Calculation	Amount
Previous annual pension	£16,500
Assumed increase	4.8%
Estimated new pension	£17,292
Personal Allowance	£12,570
Taxable income	£4,722
Income Tax at 20%	£944.40

This explains the estimate of approximately £940–£945.

However, applying 4.8% to every component may overstate the increase.

Calculation Allowing for Different Pension Increases

The full new State Pension rose from £230.25 to £241.30 per week in April 2026.

Protected payments generally increased by 3.8%.

Assuming the earlier £16,500 consisted of £11,973 in standard new State Pension and £4,527 in protected payments:

• Standard new State Pension: £12,547.60.
• Protected payment estimate: £4,527 × 1.038 = £4,699.03.
• Combined annualised entitlement: £17,246.63.
• Income above Personal Allowance: £4,676.63.
• Illustrative basic-rate tax: £935.33.

HMRC’s actual tax-year calculation may differ because it normally uses one week at the previous pension rate and 51 weeks at the new rate.

That approach produces approximately £932 in this illustration, before any applicable relief.

These figures are estimates, not confirmation of Perkins’ tax assessment.

The official 2026/27 State Pension rates explain the different uprating percentages.

How Could His State Pension Tax Change by 2027/28?

With the Personal Allowance frozen, further pension increases could create larger liabilities.

The following comparison uses simplified full-year calculations, assumes Perkins’ £16,500 starting income and excludes any Marriage Allowance or other personal adjustments.

Tax year	Estimated annual pension	Illustrative tax
2025/26	£16,500	£786
2026/27	£17,247	£935
2027/28	£17,678	£1,022

The 2027/28 estimate assumes a further 2.5% increase across the pension. The actual increase will depend on the applicable uprating rules.

For someone receiving only the full new State Pension, the position is different.

In 2026/27, the annualised amount is £12,547.60, approximately £22 below the Personal Allowance.

A minimum 2.5% increase in April 2027 would take it to approximately £12,862, creating an illustrative basic-rate liability of about £58 without government intervention.

However, the Office for Budget Responsibility’s March 2026 assumptions suggested a 3.7% increase, potentially producing an annual pension of about £13,012 and an £88 tax liability.

Neither projection is a confirmed 2027/28 payment rate.

Why Might Rachel Reeves’ Tax Exemption Not Help Perkins?

In November 2025, Chancellor Rachel Reeves told Martin Lewis that people receiving only the State Pension would not be made to complete tax returns because their pension exceeded the Personal Allowance.

She also stated that qualifying pensioners would not have to pay the resulting tax during the current Parliament.

The November 2025 Budget document outlined a narrower administrative measure.

It proposed that pensioners whose sole income was the basic or new State Pension, without increments, would not have to pay small amounts of tax through Simple Assessment from 2027/28.

Three limitations are particularly important:

1. Restricted eligibility: The wording focuses on people receiving only the basic or new State Pension without increments.
2. Small tax liabilities: The concession is designed around modest bills arising when the standard pension exceeds the tax threshold.
3. Limited duration: The Chancellor’s wider commitment applies to the current Parliament, rather than establishing a permanent tax exemption.

Perkins receives additional pension entitlements and already has a substantial tax liability.

His position therefore appears to fall outside the intended protection.

However, the precise treatment of SERPS-derived protected payments remains dependent on the final implementation rules. A protected payment is not necessarily identical to an increment arising from pension deferral.

The distinction is important when deciding eligibility.

Why Have Pension Experts Criticised the Proposed Exemption?

Former pensions minister Sir Steve Webb, now a partner at pension consultancy LCP, has warned that the proposed policy could be unfair to pensioners who accumulated additional income through work or retirement saving.

He described the approach as potentially “unfair and unworkable”.

His concern is that pensioners with comparable financial resources might face different tax outcomes simply because their income is structured differently.

For example, someone receiving only the standard State Pension could avoid a small tax bill, while another person with additional State Pension rights or a modest private pension might remain liable.

Baroness Ros Altmann has also raised concerns about unequal treatment around the eligibility threshold.

These objections do not mean the exemption has been abandoned. They demonstrate why its final design needs to explain how additional entitlements and other income sources will be treated.

How Does HMRC Collect Tax on State Pension Income?

Unlike most workplace pensions, the State Pension is paid without Income Tax being deducted before payment.

According to HMRC’s State Pension tax guidance, the department uses other mechanisms to collect any liability.

Collection method	How it works
PAYE tax code	Tax is deducted through employment income or a private pension
P800	HMRC identifies an overpayment or underpayment after reviewing the tax year
Simple Assessment (PA302)	HMRC sends a direct tax calculation and payment request
Self Assessment	The individual declares taxable income through an annual tax return

A pensioner without employment or private pension income may have no PAYE source from which HMRC can collect the tax.

Consequently, someone in Perkins’ position may receive a Simple Assessment bill and need to pay HMRC directly.

Simple Assessment generally avoids the need to submit a full Self Assessment return.

Pensioners receiving a PA302 should check the payment deadline, which is normally 31 January or three months after the assessment is issued, depending on the circumstances.

What Should Pensioners Do If HMRC Sends a Tax Bill?

An unexpected tax bill should be checked carefully rather than ignored.

Check the Tax Year and Income Figures

Confirm whether the calculation relates to 2025/26, 2026/27 or another year.

Compare HMRC’s State Pension figure against the DWP annual uprating letter and entitlement details.

For pensions that increased during the tax year, ensure the calculation reflects the correct weekly rates.

Review the Tax Code

Where tax is collected through employment or another pension, check whether HMRC has applied the correct tax code.

An incorrect estimate of pension income may result in excessive or insufficient deductions.

Challenge Incorrect Calculations

If a Simple Assessment appears incorrect, contact HMRC within the applicable dispute period, normally 60 days.

Explain the discrepancy and provide supporting documents.

If the tax is correct but unaffordable, contact HMRC promptly about available payment arrangements.

Pensioners can also use HMRC’s online pension tax estimator, updated on 5 October 2026, to assess their potential liability.

Could Marriage Allowance Reduce Perkins’ Tax Bill?

Marriage Allowance allows an eligible husband, wife or civil partner to transfer £1,260 of their Personal Allowance to their partner.

This can reduce the receiving partner’s Income Tax liability by up to £252 annually.

Generally, the transferring partner must have income below their Personal Allowance, while the recipient must satisfy the applicable tax-rate conditions.

The original account of Perkins’ circumstances indicates that his wife may already be helping reduce their tax liability through Marriage Allowance.

However, the information available does not establish precisely how that relief was reflected in his reported £800 bill.

If the transfer is already applied, it cannot be claimed again for an additional £252 reduction.

Eligible couples can currently backdate claims to the 2022/23 tax year, provided the conditions were satisfied.

For Perkins, the actual benefit depends on his wife’s taxable income, their eligibility and whether HMRC has already applied the transfer.

How Many Pensioners Are Paying Income Tax in the UK?

Frozen thresholds have contributed to a significant increase in pensioners paying Income Tax.

Earlier HMRC-based reporting estimated that approximately 8.3 million people of State Pension age paid Income Tax in 2024/25.

More recent figures provided in an August 2026 parliamentary answer showed:

Tax year	Income taxpayers over State Pension age
2023/24	8.16 million
2024/25	8.78 million
2025/26	9.08 million
2026/27	9.58 million

Figures are rounded; the last three years are projected estimates based on HMRC modelling.

The updated data illustrates why the pension tax issue extends well beyond Perkins’ individual circumstances.

Our examination also found that HMRC acknowledged historical errors affecting some State Pension tax calculations.

The department confirmed that incorrect annual pension figures had entered certain PAYE, Self Assessment and Simple Assessment processes.

That issue is explained further in the analysis of HMRC overtaxing State Pension recipients.

However, a historical calculation error is separate from the legitimate tax liability created when pension income exceeds the Personal Allowance.

Which State Pension Recipients Could Face Income Tax?

The following table provides a general eligibility checker based on 2026/27 rules.

Pension circumstances	Tax position	Likely collection
Full new State Pension only	Normally no tax at current standard rate	None
Basic State Pension only	Normally no tax without additional income	None
SERPS or protected payment	Tax possible above £12,570	PAYE, PA302 or Self Assessment
Deferred State Pension	Increased income may create tax	Depends on other income
State Pension plus private pension	Tax depends on total taxable income	Usually PAYE
Scottish pensioner	Scottish rates apply to pension income	PAYE, PA302 or Self Assessment

Scotland has different Income Tax bands.

For 2026/27, the Scottish starter rate is 19%, followed by a 20% basic rate and 21% intermediate rate.

Consequently, applying a flat 20% rate to every Scottish pensioner could produce an inaccurate estimate.

Why Are Frozen Tax Thresholds Affecting Pensioners?

The standard UK Personal Allowance has remained at £12,570 since April 2021 and is legislated to remain at that level through 2030/31.

Meanwhile, the triple lock generally increases the basic and new State Pension by the highest of earnings growth, inflation or 2.5%.

This creates fiscal drag: more income becomes taxable without the Government increasing the headline Income Tax rate.

The Conservatives’ proposed Triple Lock Plus policy during the 2024 election would instead have increased the Personal Allowance for people above State Pension age to keep it ahead of the standard State Pension.

The Chartered Institute of Taxation explained that the proposal would not abolish pension taxation but would provide qualifying pensioners with a higher allowance.

That policy was not implemented.

Under a simplified projection, Perkins’ estimated £17,247 pension in 2026/27 increasing by 2.5% annually for four years would reach approximately £19,037 in 2030/31.

With the allowance still at £12,570, basic-rate tax would approach £1,293 before reliefs.

This provides a transparent basis for the previously reported £1,300 projection, rather than treating that figure as a confirmed future bill.

What Can Pensioners Do to Reduce Their Tax Liability?

Pensioners may have legitimate tax-planning options depending on their income, marital circumstances and retirement arrangements.

Marriage Allowance: Eligible couples may benefit from a transfer worth up to £252 annually.

ISA savings: Interest and eligible investment returns within ISAs are generally free from UK Income Tax.

Savings allowances: Basic-rate taxpayers can normally receive up to £1,000 of savings interest within the Personal Savings Allowance. Some lower-income pensioners may also qualify for the starting rate for savings, worth up to £5,000 of eligible interest.

Pension income planning: Where private pension arrangements offer flexibility, spreading taxable withdrawals across different tax years may help manage marginal tax rates. Transfers of pension income between spouses are not automatically permitted.

State Pension deferral: For people reaching State Pension age on or after 6 April 2016, deferring normally adds 1% for every nine weeks, equivalent to just under 5.8% annually. However, deferral means giving up immediate income and can increase later taxable pension payments.

Pensioners should consider the long-term financial effect before making decisions.

What Does Alan Perkins’ Case Reveal About Retirement Finances?

Perkins’ experience shows why retirement income and taxable income must be assessed separately.

The Pensions and Lifetime Savings Association’s 2025 Retirement Living Standards estimated that a one-person household needed approximately £13,400 annually for a minimum retirement lifestyle, assuming no rent or mortgage.

Although Perkins’ reported income exceeds that figure, it does not necessarily indicate financial comfort, particularly after tax and other household expenses.

His case also illustrates why pensioners should understand the interaction between SERPS, protected payments, annual uprating rules and Income Tax.

More information about the separate issue of pension calculation errors is available in the examination of the HMRC triple lock tax mistake.

FAQs About Alan Perkins State Pension Tax

Why was Alan Perkins charged £800 in tax?

His reported annual State Pension income exceeded the £12,570 Personal Allowance because of additional pension entitlements built up during his working life.

Is the full new State Pension taxable in 2026/27?

It is taxable income, but the annualised full rate of £12,547.60 remains below the standard Personal Allowance.

Will Rachel Reeves remove State Pension tax?

The Government has proposed protection from small tax bills for certain pensioners from 2027/28. It is not a general abolition of State Pension taxation.

Can HMRC take tax directly from State Pension payments?

Under the current arrangements, State Pension payments are made without Income Tax being deducted. HMRC normally collects liabilities separately.

Can pensioners appeal an incorrect tax assessment?

Yes. Pensioners can challenge incorrect figures through HMRC’s relevant review or dispute process and should follow the deadlines in their letters.

Will Perkins’ tax bill reach £1,300 by 2031?

It could approach that level under a simplified 2.5% annual growth scenario, but the actual amount depends on future pension uprating, allowances, reliefs and tax rules.